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Downwards movement was expected for Thursday’s session.

The target at 2,190 was met and exceeded so far by 2.56 points.

Summary: The main wave count now expects upwards movement here for a fifth wave to end a third wave. The target is at 2,226 – 2,227.

Last monthly chart for the main wave count is here.

Last weekly chart is here.

New updates to this analysis are in bold.



S&P 500 daily 2016
Click chart to enlarge.

Cycle wave V must subdivide as a five wave structure. At 2,500 it would reach equality in length with cycle wave I. This is the most common Fibonacci ratio for a fifth wave for this market, so this target should have a reasonable probability.

Cycle wave V within Super Cycle wave (V) should exhibit internal weakness. At its end, it should exhibit strong multiple divergence at highs.

Within cycle wave V, primary waves 1 and 2 may be complete. Primary wave 3 may be over halfway through and is so far exhibiting weaker momentum than primary wave 1, which fits with the larger picture of expected weakness for this fifth wave at cycle degree. It is possible primary wave 3 may fall short of the target and not reach equality in length with primary wave 1.

Within primary wave 3, the upcoming correction for intermediate wave (4) should be relatively brief and shallow. Intermediate wave (1) was over very quickly within one day. Intermediate wave (4) may last a little longer, perhaps two or three days, and may not move into intermediate wave (1) price territory below 2,146.69.

At 2,473 primary wave 3 would reach equality in length with primary wave 1. This Fibonacci ratio is chosen for this target calculation because it fits with the higher target at 2,500.

When primary wave 3 is complete, then the following correction for primary wave 4 may last about one to three months and should be a very shallow correction remaining above primary wave 1 price territory.

The maroon channel is redrawn as a base channel about primary waves 1 and 2. Draw the first trend line from the start of primary wave 1 at the low of 1,810.10 on the 11th of February, 2016, then place a parallel copy on the high of primary wave 1. Add a mid line, which has shown about where price has been finding support and resistance.


S&P 500 hourly 2016
Click chart to enlarge.

At 2,227 intermediate wave (3) would reach 1.618 the length of intermediate wave (1).

Now within intermediate wave (3), at 2,226 minor wave 5 would reach 0.618 the length of minor wave 3. This gives a 1 point target zone calculated at two degrees.

This wave count sees the middle of a third wave particularly weak; this is not common. The larger context of a fifth wave at cycle and Super Cycle degrees may see persistent unusual weakness though, so this wave count is possible.

At this stage, it looks like minor wave 4 has completed as a very common expanded flat correction. Minute wave c is 2.07 points longer than 1.618 the length of minute wave a.

Expanded flats do not fit into trend channels. Use a smaller channel about minute wave c. When price breaks above the upper edge of this small green channel, then it should be indicating minute wave c is complete.

At that stage, it would be most likely that minor wave 4 should be complete. It would be possible that minor wave 4 could continue further sideways as a double flat or double combination, but that would see it grossly disproportionate to minor wave 2 and the rest of intermediate wave (3), so this possibility has a very low probability.

While price remains within the narrow green channel, it must be accepted that there is no indication of a low in place for minor wave 4. Minor wave 4 may continue lower.

Minor wave 4 may not move into minor wave 1 price territory below 2,182.30.

The wider blue channel is drawn using Elliott’s technique. Draw the first trend line from the ends of minor waves 1 to 3, then place a parallel copy on the end of minor wave 2. Minor wave 4 has slightly breached the channel; sometimes fourth waves behave like this. If the breach develops further, then the channel should be redrawn.

The S&P often forms slow rounded tops. When it does this the many subdivisions make analysis difficult. Only when support is breached by movement that is clearly downwards and not sideways would it be an indication of a deeper pullback.



S&P 500 daily 2016
Click chart to enlarge.

There is a wave count that fits for the Dow Industrials that sees an imminent trend change. It relies upon an ending diagonal, but that idea will not fit well for the S&P.

What if an impulse upwards is now complete? The large corrections labelled primary waves 2 and 4 do look like they should be labelled at the same degree as each other, so that gives this wave count the right look.

Primary wave 4 ends within primary wave 2 price territory, but it does not overlap primary wave 1. Primary wave 1 has its high at 2,057 and primary wave 4 has its low at 2,083.79. The rule is met.

There is alternation between the double combination of primary wave 2 and the double zigzag of primary wave 4. Even though both are labelled as multiples W-X-Y, these are different structures belonging to different groups of corrective structures.

Primary wave 3 is shorter than primary wave 1. This limits primary wave 5 to no longer than equality with primary wave 3 at 2,285.53.

The equivalent wave count for DJIA expects an end now to upwards movement and the start of a large bear market. Only for that reason will this alternate for the S&P also expect a reversal here.

This wave count has good proportions. Primary wave 1 lasted a Fibonacci 34 days, primary wave 2 lasted 60 days, primary wave 3 lasted 40 days, and primary wave 4 lasted 52 days. Primary wave 5 may be more brief than primary wave 3. If it exhibits a Fibonacci duration, it may total a Fibonacci 34 days and that would see it end on the 22nd of December. If it is only a Fibonacci 21 days in duration, it may end more quickly on the 2nd of December.



DJIA daily 2016
Click chart to enlarge.

An ending contracting diagonal may be complete for the DJIA. This fits into the same picture as the alternate wave count for the S&P; both see a final fifth wave coming to an end very soon.

The 1-3 trend line is now overshot. Contracting diagonals normally end very quickly after this line is overshot, and it can be surprising how small the overshoot is. This wave count expects a very strong reversal.

Yesterday completed a gravestone doji, which is a reversal pattern. However, today completes a green daily candlestick and this may be considered to have negated the doji.

If a new high is made, then the signal from the doji has not worked. If price moves strongly lower tomorrow, then it may have.

The reversal is usually swift and strong when ending diagonals are complete. Today’s green daily candlestick does not fit this definition, so price is not behaving as expected.

The diagonal is contracting, so the final fifth wave is limited to no longer than equality in length with primary wave 3 at 19,488.92.



S&P 500 weekly 2016
Click chart to enlarge. Chart courtesy of

Another upwards week comes with an increase in range but a strong decline in volume. This is partly due to the Thanksgiving Day holiday making this week short of one day, so not too much will be read into it.

On Balance Volume is bullish.

There is some mid term divergence between price and RSI: price is making new all time highs, but RSI is not following. This indicates weakness in price. It is not a signal of a trend change, only indication of weakness.


S&P 500 daily 2016
Click chart to enlarge. Chart courtesy of

Today’s red daily candlestick comes with some small decline in volume, but volume is still relatively heavy. Still, more often than not a decline in downwards volume from one day to the next has recently been followed by an upwards day. This is what should be expected as fairly likely tomorrow if the pattern persists.

ADX is now declining, indicating no clear trend. ATR is flat to declining and Bollinger Bands are contracting. All three indictors agree that the market is not currently trending. The Elliott wave count sees the last four sessions as a correction within the trend, so this agrees.

On Balance Volume is today finding support at the yellow trend line. This may assist to halt the fall in price. Price is also at support at 2,187, a prior area of resistance and support. It is also at support from the 13 day moving average.

If OBV breaks below the yellow line tomorrow, that would be a weak bearish signal. Weak only because this line has been tested only three times and is not long held.

RSI is back within neutral territory and there is plenty of room for price to rise again.

Stochastics is still not back in neutral territory though, but this oscillator may remain extreme for reasonable periods of time during a trending market.

MACD may be rolling over, but it has not turned bearish yet.

The short term average is flat today, but up to today has been rising. It remains above the mid term average, which is still rising, and both are above the long term average, which is also still rising. The trend still looks to be up, so corrections should be used as an opportunity to join the trend.


VIX daily 2016
Click chart to enlarge. Chart courtesy of

There are a few instances of multi day divergence between price and inverted VIX noted here. Bearish divergence is blue. Bullish divergence is yellow. It appears so far that divergence between inverted VIX and price is again working to indicate short term movements spanning one or two days. While this seems to be working more often than not, it is not always working. As with everything in technical analysis, there is nothing that is certain. This is an exercise in probability.

There is mid term divergence between price and VIX, but no weight will be given to it because it has recently proven unreliable. There is no new short term divergence noted today between price and inverted VIX as both have moved lower.


AD Line daily 2016
Click chart to enlarge. Chart courtesy of

Short term bullish and bearish divergence is again working between price and the AD line to show the direction for the following one or two days.

There is longer term divergence between price and the AD line, but like inverted VIX this has proven reasonably recently to be unreliable. It will be given no weight here.

Yesterday’s single day bearish divergence between price and the AD line may now be resolved by a reasonable downwards day.

While there is mid term divergence between price and the AD line, it will be given no weight in this analysis as it has proven to be recently unreliable. No new short term divergence is noted today.


Major lows within the old bull market:

DJIA: 15,855.12 (15th October, 2014) – closed below on 25th August, 2015.

DJT: 7,700.49 (12th October, 2014) – closed below on 24th August, 2015.

S&P500: 1,821.61 (15th October, 2014) – has not closed below this point yet.

Nasdaq: 4,117.84 (15th October, 2014) – has not closed below this point yet.

Major highs within the bear market from November 2014:

DJIA: 17,977.85 (4th November, 2015) – closed above on 18th April, 2016.

DJT: 8,358.20 (20th November, 2015) – closed above this point on the 9th of November, 2016.

S&P500: 2,116.48 (3rd November, 2015) – closed above this point on 8th June, 2016.

Nasdaq: 5,176.77 (2nd December, 2015) – closed above this point on 1st August, 2016.

Dow Theory Conclusion: The transportations indicate an end to the prior bear market. The transportation index confirms a bull market.

This analysis is published @ 09:15 p.m. EST.